Martin Parkinson: positioning Australia in the fourth industrial revolution

By Martin Parkinson

October 20, 2017

Dr Martin Parkinson, secretary of the Department of the Prime Minister and Cabinet, spoke at the Sir Roland Wilson Foundation secretaries dinner on this week. The event brings together fellows, researchers and top public servants.

I acknowledge the Ngunnawal people, Traditional Owners of the land on which we meet, and pay my respect to their elders, past and present.

It’s a great pleasure to join you all this evening: seasoned public servants and senior academics, as well as our Roland Wilson scholars—many familiar faces among them!

I have to confess to a quiet admiration for Sir Roland, the first economist to join the senior ranks of the public service, and the first economist to lead the Treasury. Not only was he the first in his family to finish high school, he went on to undertake a PhD. Indeed he liked the PhD path so much that he received two: one from Oxford and the other from Chicago.

And who wouldn’t admire the precocity of someone who became Commonwealth Statistician at 32, and a departmental secretary at 36? Or the audacity of someone who apparently told his Treasurer, Billy McMahon, “Bloody well do what we tell you and you’ll be fine.”

Whether that’s apocryphal or not, it reflects his quite serious devotion to serving the public through the government of the day. He declined a couple of plum academic jobs because he saw the value of applying his knowledge to the public service.

That’s the legacy in which all of you work, and which brings us together tonight.

Another aspect of that legacy is the way his progressive ideas for a more open economy often put him at odds with the times he lived in, and with the sentinels of the status quo.

It’s in that spirit that I want to focus my remarks tonight: the spirit of welcoming disruption, of seeing beyond the status quo, and building uncertainty and complexity into our vision of the future.

Global change and the fourth industrial revolution

As the Prime Minister reminds us, we’re living in a time of change the pace and scale of which are unprecedented in human history.

Klaus Schwab, founder and chair of the World Economic Forum in Davos, describes our moment as the ‘fourth industrial revolution.’

“We’re talking about skills we don’t have yet; jobs that don’t exist yet; an industry we’re building from the ground up, and for which a siloed approach simply won’t work.”

If the third revolution introduced us to digital technology and the online world, the fourth is about how that technology is interacting with and altering human lives and systems.

Schwab says this exponential change is “disrupting almost every industry in every country” and transforming “entire systems of production, management and governance.”

You’ve only got to look at the capacity of 5G telecommunications—not only its speed and data capability, but the capacity for mesh networks—to know that even more disruption is coming. And soon! 5G is to be rolled out in 2020.

Wherever we look in the world, we observe disruption—to industry, to community, to government—and different approaches to accommodating it.

Production processes continue to fragment along global value chains, which makes the world more interconnected and countries more specialised.

Australia has specialised in relatively simple exports, which often become inputs at the beginning of other value chains—our natural resources, for instance, being shipped off to places that use them in manufacturing. That isn’t a bad thing: countries, like people, gain most when they specialise in things they’re good at and trade for those they’re not. We’ve capitalised on our comparative advantages.

But comparative advantage is not immutable. The next wave of growth and job creation is coming from new technology—the same technology that is causing disruption. Whether you hear that as opportunity or threat depends on your point of view—and indeed, whether you have the capability to thrive in a very different job market. Which goes in part to education. A better education system can help create different advantages for us as a nation.

New technology creates new industries, new jobs; it can sweep away barriers to workforce participation for people with disability or responsibility outside work.

But while the ‘gig economy’ can provide employment for people who are otherwise unemployed or underemployed, it can also lead to reduced certainty of income. So while technology and automation can make jobs safer, incomes higher, and productivity greater, technology’s rising tide may not lift all ships. This can engender anxiety in some regions and industries that feel the brunt of its effects. And we’ve seen this anxiety translate into influential counter-movements in the US and elsewhere.

The onus is on policy-makers to think not only about the broad economic benefits of change, but also about its social and cultural impact.

As I mentioned, different countries are responding in different ways to these trends.

Brexit has been interpreted as, in part, a reaction against an open and integrated European economy.

A number of countries are considering whether there’s a more active role for government to play in the growth and development of industries. The UK, Netherlands, France and Germany have all selected and are strategically targeting support towards industries they consider align with their comparative advantages.

Australia faces its own Rubicon here; however we plan to manage these challenges, our response needs to be well-informed and evidence-based. And it needs to be reflective not reactive; farsighted rather than myopic.

Global change – the security environment

Concurrent with these forces of social and economic change are forces of instability and volatility. The economic and strategic world order that has prevailed since the Second World War is proving neither as immutable nor as unassailable as it had seemed.

Our region contains some of the world’s most precarious flashpoints: territorial disputes in the South China Sea, and the unstable state of North Korea.

A growing number of regional forces are gaining range, reach and precision in defence capability. By 2035, about half the world’s submarines will be operating in the Indo-Pacific.

All of this has a direct bearing on Australia, especially given our disproportionate maritime jurisdiction: we have one of the world’s largest maritime zones—10 million square kilometres, and one of the largest search and rescue areas—some 53 million square kilometres of the Indian, Pacific and Southern Oceans.

That means our capability superiority will be tested in the not too distant future. And the old verities of a stable, secure world order can no longer be taken for granted.

Last year’s defence white paper told us this, and spelled out how the shift in global economic and political power to the Indo-Pacific will necessarily change our strategic outlook.

Traditionally we’ve outsourced much of our defence capability, but in the new environment a sovereign industry, with the highest levels of capability and sophistication, will be critical to meeting our defence objectives of a secure, resilient Australia and a secure near region.

How does Australia respond to these challenges?

So taking all of this together—the rapidly evolving economic, technological and security landscape— how does Australia respond? How do we position ourselves both for the challenges we can foresee over the next ten, twenty, fifty years—and the ones we can’t?

These questions cut across many sectors of society. They are greater in scale and scope than what we’ve faced before, requiring a new kind of response.

One case in which we are responding differently is the development of a sovereign national shipbuilding industry.

It’s easy to be captured by headlines about this many ships or that many jobs, or to see this as simply an exercise in job creation, leading to legitimate questions about the trade-off between jobs and the cost premium of ‘built in Australia.’

But in my view, this completely misses the point. At the very least, it should be acknowledged that the changing strategic environment has triggered the greatest recapitalisation of the Australian navy since the Second World War. But more than that, the decision to create a sovereign capability has triggered the largest, most complex and technically difficult manufacturing challenge we’ve ever contemplated.

We are building an entirely new national industry, one that will underpin our defence capability for generations, and inject new skills, technology, and value chains into our economy.

Our children and grandchildren may fight on these platforms thirty years from today. Their safety and our security depends on decisions we make today. We need to remember this when we hear politicking about whether jobs should be in one state or another, or whether we should abandon the current approach and buy off-the-shelf systems not suited to our strategic circumstances.

This is a truly national endeavour: involving Australian governments at federal, state and local levels, and Australian industry right across the spectrum—from design to construction to sustainment.

It’s about building our defence capability, but it involves industry and industry policy much more broadly. It involves our employment, education, and immigration systems to build and skill the workforce we’ll need over the medium term.

We’re talking about skills we don’t have yet; jobs that don’t exist yet; an industry we’re building from the ground up, and for which a siloed approach simply won’t work.

And we’re talking, ultimately, about an investment in the future. That’s why focusing merely on job creation is so deficient. What’s required for long-term security is strength and capability, the kind of capability you would want your children and grandchildren to have at their disposal in an uncertain and challenging world.

The challenge for the public service

I have described some of the disruptive forces affecting our society, economy and strategic order. These forces are already having profound and rapid impacts.

My message to my public sector colleagues is simple. We cannot simply observe these forces with detached interest. We need to disrupt ourselves to avoid being disrupted.

Spending by all levels of government in Australia accounts for more than 35 per cent of GDP, and Commonwealth public sector employees represent about 2 per cent of the national workforce. We have the opportunity, and indeed the professional obligation, to have a much more significant impact on innovation and opportunities in Australia than we do today.

This means the APS needs to change the way we do business. To be better at collaborating with stakeholders to tackle complex problems. To become a twenty-first century public service better equipped to help create opportunities for and satisfy the needs of business and citizens.

To return to Klaus Schwab, the choice we face is stark: our ability to adapt, he says, will determine our survival. Government systems and public authorities will only endure “if they prove capable of embracing a world of disruptive change, subjecting their structures to the levels of transparency and efficiency that will enable them to maintain their competitive edge.”

To my mind, the shipbuilding endeavour is emblematic of the need for new thinking and new capabilities to meet the adaptive challenge ahead of us. And the starting point has to be a prescient observance of the world around us and the trends that are shaping it.

Our approach must be far-sighted and informed by the facts. It must include a willingness to question our assumptions and a dogged pursuit of possible answers. We have to be ready to embrace change, and to abandon traditions or positions that no longer serve us well.

And it must be underpinned by rigorous research, evidence and analysis, and by better using the data we hold and, increasingly, are making publicly available.

We need to put the basic culture, capability and systems of the APS under scrutiny, if we’re to make the transformative change we need.


I want to conclude with the sense of optimism that is evident in this room.

Tonight we celebrate the Sir Roland Wilson Foundation scholars, outstanding public servants studying with some of the best scholars and research institutions in the world.

You’re developing the expertise and intellectual and psychological capacities the public service of the future will need—things like critical thinking; comfort with ambiguity and complexity; innovation rather than preservation as a default mindset; the importance of diversity of backgrounds and leadership styles.

So I take courage, looking around this room at our early career scholars, that the knowledge, curiosity and critical thinking that are driving your research will ultimately come back into the APS, injecting fresh ideas and energy where they are most needed.

We can’t underestimate the adaptive challenge of the days ahead. I’m hopeful, looking at you, that we can and will rise to meet it.

This speech was first published at the Department of the Prime Minister and Cabinet.

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